Breaking

Coronavirus has already dealt a blow to Social Security's finances. Trump's payroll tax holiday could make it worse - MSN Money
Aug 08, 2020 2 mins, 2 secs
And the crush of coronavirus-induced layoffs has only deepened the problem by slashing the amount of payroll tax revenue going into their trust funds.

A big fan of payroll tax cuts, Trump signed an executive action Saturday deferring the employee portion of payroll taxes -- 6.2% for Social Security and 1.45% for Medicare -- for workers making less than $100,000 a year through the rest of 2020.

If he's reelected, Trump said, he plans to forgive the taxes and make permanent cuts to the payroll taxes.

"I'm going to make them all permanent," he said.

Otherwise, presumably, workers would have to pay the taxes at the end of the year.

Trump sought to include the controversial measure -- which won't do anything to help the unemployed -- in the latest coronavirus relief package currently being hashed out on Capitol Hill.

After that, beneficiaries could see a 31% cut in retirement payments.

The program's trustees had projected earlier this year that the trust funds would be depleted in 2035, but that did not take the coronavirus pandemic into account.

It would be the first time the estimated insolvency date was within a decade since the crisis of the 1980s, which prompted several changes, including raising the retirement age, said Shai Akabas, the center's director of economy policy.

"An already urgent situation has become even more pressing," Akabas said, noting the severe drop in payroll tax revenue.

Those who earn more than $200,000, or $250,000 if married, pay an additional 0.9% Medicare tax.

Last year, between August and December, about $500 billion went into the Social Security and Medicare trust funds from payroll taxes, according to the Center for American Progress, a left-leaning think tank.

The big loss of jobs means the two entitlement programs' trust funds will likely be drained years earlier than forecast, several think tanks say.

The projection depends heavily on when the economy is estimated to recover.

But if business lock downs continue into next year or if there's a permanent reduction in economic activity, the negative effect could be "substantially larger."

The situation is even more dire for the Medicare trust fund, which its trustees projected earlier this year would run out of money by 2026, not taking into account the pandemic.

If employment and payroll tax revenues follow the same pattern as the Great Recession and its aftermath, the hit to the Medicare trust fund could be $175 billion between 2020 and 2023, according to an estimate by experts at the American Enterprise Institute, a right-leaning think tank.

RECENT NEWS

SUBSCRIBE

Get monthly updates and free resources.

CONNECT WITH US

© Copyright 2024 365NEWSX - All RIGHTS RESERVED